St. Michaels School ranks investments by using the profitability index (PI). The following data relate to Project X and Project Y: Project X Project YInitial Investment$400,000 $1,300,000 Present value of inflows 600,000 1,800,000 Which project would be more attractive as judged by its ranking, and why?
A. Project Y because the PI is 1.38.
B. Project Y because the PI is 0.72.
C. Project X because the PI is 0.67.
D. Both projects would be equally attractive in terms of ranking, as indicated by a positive PI.
E. Project X because the PI is 1.50.
Answer: E
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